U.S. Farmers May Increase Corn Sales to China as Demand Rises
July 29 (Bloomberg) -- China, consumer of a fifth of the world's corn, may buy more of the grain from the U.S. as a growing appetite for pork, chicken and sweeteners will probably make the Asian country a net importer, traders and analysts said.
China may need 7 million tons more corn than it will grow in the year starting Sept. 1, according to the U.S. Department of Agriculture. That's double the estimated shortfall in 2004-05.
Increasing demand, helped by a revaluation of China's yuan, which lowers the cost of imports, may create new buyers for the $23 billion U.S. corn crop. Archer Daniels Midland Co., Bunge Ltd., Cargill Inc. and other trading companies shipping grain to Asia would benefit from the expanding sales.
China is ``going to import corn within the next few years'' to meet rising consumption, said James Rice, Vice-President of the China unit of Tyson Foods Inc., the world's largest meat processor. The yuan's revaluation ``means prices will be a little bit more favorable to domestic purchasers,'' he said in a July 21 interview from Shanghai.
China has traditionally been a net corn exporter, competing with the U.S. for buyers in Japan and South Korea. It exported more than 15 million tons of corn as recently as 2002-03.
The country's export surpluses have dwindled as the area of available farmland declined, and as it used more of the grain at home for animal feed and in industrial products, such as ethanol and high fructose corn syrup, a sweetener in soft drinks.
Encourage Planting
``The Chinese government definitely encourages farmers to plant grains, though it's impossible to be totally self- sufficient because our population is too big and arable land is shrinking,'' An Dafeng, deputy director of the Beijing-based China National Grain and Oils Information Center, said yesterday in an interview. China aims to meet at least 90 percent of its grain requirement, he said.
China's unsold stockpiles of the grain are forecast to fall to 25.7 million tons by August next year, a quarter of the 2000- 01 level and the lowest in 28 years, according to the U.S. Department of Agriculture's Foreign Agricultural Service.
The department said July 12 China may harvest 127 million tons of corn in the coming year, 1 million less than 2004-05. It forecast imports of 200,000 tons and exports of 3 million tons.
``Disasters this year like drought and floods do appear to be worse compared with last year,'' Zheng Jingping, a spokesman for the National Bureau of Statistics, said in Beijing on July 20. ``We're monitoring the situation. It's still too early to forecast'' production.
Corn imports totaled a mere 2,366 tons in 2004, 23 percent of which came from the U.S., according to customs data.
More Meat
More corn is needed to fuel China's growing livestock industries. Meat output in the world's biggest pork and second- largest poultry-producing nation rose 5 percent a year on average between 1991 and 2003, according to Beijing Orient Agribusiness Consultant Ltd. The Ministry of Agriculture affiliate estimates domestic corn production fell 13 percent in the past five years.
``It's highly possible that China will become a net corn importer within two years to three years,'' said Nie Ben, an analyst at Liaoning Cifco Futures Co. in Dalian. ``Demand is mainly driven by hog and chicken breeders. Our biggest problem is limited arable land.''
Corn's use in industrial products, expanding 10 percent a year, is also spurring demand, Chu Lalin, chief engineer of Global Bio-Chem Technology Group Co., said in a report prepared for a two-day grain conference starting today in Beijing. The Hong Kong-based company is among those using almost 20 million tons of corn in China for making starch, syrup and amino acids.
Coca-Cola
Coca-Cola bottling plants in China may need about 800,000 tons of corn syrup a year to sweeten its soft drinks, GBT-Cargill High Fructose (Shanghai) Co., a 50-50 venture between Cargill Inc. and Global Bio-Chem, said three years ago.
``China's demand for corn is increasing every year, driven by feed factories and processors of starch, amino acids and ethanol fuels,'' said Gao Zhao, chief of trading at Beijing-based China Grains and Oils Group.
China's approval this month of an eighth genetically modified corn variety ``opens a channel'' for U.S. corn, Gao said. Almost half the corn grown in the U.S. is from genetically modified seeds.
U.S. farmers also stand to benefit from a stronger yuan versus the dollar, which may boost Chinese imports and make China's corn exports less competitive overseas.
China on July 21 allowed the yuan to appreciate against the dollar for the first time in a decade. The new rate strengthened the currency 2.1 percent to 8.11 per U.S. dollar immediately.
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